North American Reports, Site Selection Magazine, January 2003

Politics may make for strange bedfellows. A major New York site selection decision, however, made for surprisingly cordial ones.

       
There on the dais, a mere six days before November’s elections, were Gov. George Pataki (R) and U.S. Sen. Hillary Rodham Clinton (D), linked in pro-business bipartisanship to welcome SCIENX‘s 505-employee high-tech manufacturing operation to the Griffiss Business and Technology Park in Rome, N.Y.

U.S. Sen. Hillary Clinton (D) and longtime U.S. Rep. Sherwood Boehlert (R), center, are flanked by (l. to r.) SCIENX officials Christopher Rawbone, vice president of business development; Seth Pickett, vice president of strategic development; Jeffrey Phelan, president; Jerry Nims, chairman; and David Hardesty, vice president of sales, at the announcement of the company’s 505-employee high-tech manufacturing operation in Rome, N.Y.

       
“I greatly appreciate the governor’s strong support and tireless effort to make this happen,” said Clinton — who the night before hosted a fundraiser for H. Carl McCall, Pataki’s Democratic gubernatorial challenger.

       
“I have to thank Sen. Clinton for her aggressiveness in telling SCIENX to come to Rome,” Pataki said. “Great, great job.”

       
And that recruiting job landed a manufacturing project that could be the start of something very big.

Consider Jeffrey Phelan’s business card, the catalyst that set Scienx on the road leading to Rome. That card came into play when Scienx President Phelan attended a fundraiser earlier this year in Washington, D.C., where parent firm Orasee has a Fairfax, Va., office.

       
Clinton was also at the fundraiser, and the senator struck up a conversation with Phelan. Phelan handed her his business card — a three-dimensional demonstration of Scienx’s cutting-edge anti-counterfeiting technology — prompting a discussion of Orasee’s site-selection plans.

       
“I was talking about what we were doing, and she literally grabbed me by the shirt and said, ‘You’ve got to come to Rome,'” Phelan explains from his Fairfax office, where he headed the location team. “And I thought, ‘Rome, Italy.’ I had no idea what she was talking about.”

SCIENX, though, rapidly learned more about New York’s Rome. Until then, the location search had focused on Georgia (where Orasee has its Atlanta-metro area headquarters), Virginia and the U. K.

       
But Rome offered two substantial pluses: the U.S. Air Force Consolidated Intelligence and Reconnaissance Laboratory, and the planned Griffiss Institute for Information Assurance, which will specialize in information security. The two labs dovetail nicely with SCIENX’s niche — creating barriers to counterfeiting by combining sophisticated algorithms and ultra-thin micro-optical lens material. Attempts to alter SCIENX-made images essentially destroy them.

       
Three of SCIENX’s major target markets are currency, brand labels and identity documents. Collectively, those markets annually lose US$574 billion in revenues to counterfeiting and piracy.

       
Startup SCIENX already has contracts with the U.S. Air Force Air Command, the National Image and Mapping Agency, and the Secret Service. “We’re at the very, very front end of imaging capability for military, intelligence and security applications,” Phelan explains.

The area’s industrial tradition also fits SCIENX’s focus.

       
“They have a legacy of manufacturing and extrusion technologies and a good cross-pollinization of the work force,” says Phelan. “Upstate New York also has an imaging legacy, with companies like Kodak and Xerox. And they’re hungry for jobs up there, which we see as a massive upside.”

       
SCIENX is largely self-financing its project. Unlike many startups, the company is drawing strong venture-capitalist support. “We’re in a market in which there’s immediate demand,” says Phelan. “The counterfeit economy is growing ten times faster than the global economy.” However, SCIENX is eligible to apply for $1.3 million in state job-creation grants, as well as enterprise zone incentives. The company is also getting assistance from Mohawk Valley Edge, the Rome-based economic development agency that Phelan praises as a key player. Mohawk Valley Edge is financing the fit-out of SCIENX’s 55,000-sq.-ft. (5,110-sq.-m.) shell building. “We’re getting a very aggressive lease rate with an option to purchase,” Phelan adds.

Phelan and a dozen other SCIENX managers will relocate their families to Rome.

       
“We’ll start with about 45 people, and we expect to begin production in the latter part of 2003,” he says. “We’re projecting adding 100 to 125 employees a year, reaching 505 if we meet our business projections.”

       
Coming so near Election Day, the project announcement spurred “numerous conspiracy theories — it was hilarious,” says Phelan. “But we were never pressured on the timing, which we drove, based on our relationships with customers, strategic partners and the investment community.”

       
That bipartisan project backing, he adds, “was an encouraging and enlightening process. The whole team moved in lockstep.

       
“They really get it up there on the political side of supporting companies,” says Phelan. “When they see a real good fit, they go after it with the cleats on.”

Like other automakers with significant U.S. West Coast port operations, Toyota hopes to get things rolling again quickly.

When ships that normally turn around in two days instead sit for two weeks, the worldwide bottleneck that results might seem insurmountable. That’s what faced West Coast ports during the October lockout of longshoremen. As an agreement was finally ratified by both sides in late November, the mess, like an unwelcome cold front, had already begun to move back out to sea.

       
At one point, a total of 126 container vessels were waiting in line near the nation’s biggest container hub port at Los Angeles-Long Beach, Calif. The combined annual volume of all West Coast ports is valued at some $300 billion. Much of that comes from the automotive sector, with the result that several OEM North American divisions had to shut down operations at some point because of the slowdown.

       
Many of the parts used at Toyota’s North American manufacturing plants are U.S.-sourced. And Toyota imports fewer than 40 percent of its vehicles sold in North America.

       
But about two-thirds of those imports come through two ports that use International Longshore and Warehouse Union labor — Portland and Los Angeles/Long Beach. Toyota also exports vehicles to Japan and Taiwan, as well as Europe and other locations, having shipped out 10,575 vehicles in 2001.

       
“On average, ships carrying our vehicles arrive every two to three days,” says Sanford Smith, national real estate manager for Toyota Motor Sales. “Typically, there are about 3,500-4,500 vehicles on each ship. Ships transporting parts arrive daily with approximately 25 containers per shipment.”

       
One sticking point in union negotiations had been the concern that new technology on the docks, such as the use of container-management software, means less high-paying jobs for longshoremen.

       
The systems, in use in other parts of the world for years, are now being implemented, and the ILWU stands to lose some 400 jobs because of the move. Smith points out that the automation issue at the ports has no direct impact on Toyota’s port operations.

       
“However, indirectly, it could improve lead time, enable lower rates for the dray and increased productivity,” he says. “For instance, truck drivers would be able to turn more loads and provide more efficient gate operations.”

The unique flooring of the UPS Worldport facility in Louisville allows for the easy transport of containers which can sometimes weigh several thousand pounds.

In September 2002, United Parcel Service announced it had completed its $1-billion expansion of the UPS Worldport air facility in Louisville, Ky., a 4-million sq.-ft. (371,600-sq.-m.) project that allows the processing of 304,000 packages an hour, or double its former capacity. With its 23,000 employees, UPS is a leader in Kentucky shipping, but it’s not the only one growing. The DHL Worldwide Express U.S. hub at Greater Cincinnati/Northern Kentucky International Airport is undergoing its own doubling in size, a $200-million project. And on the West Coast, UPS was at it again, completing a $44-million air hub expansion in November.

       
The U.S. growth is just one aspect of UPS’s expansion of its worldwide air network. In the past year the company has opened an intra-Asia air hub in the Philippines, completed its Latin America gateway expansion at Miami International Airport, and announced plans to double the sorting capacity of its Europe air hub in Cologne/Bonn, Germany. An ultra-fast automated hub recently opened in a 335,000-sq.-ft. (31,122-sq.-m.) building located on 56 acres in Maple Grove, Minn.

       
Meanwhile, FedEx, known for its air-express service, is growing its ground service everywhere. The Memphis-based company announced in October it would invest $1.8 billion over the next six years in order to, yes, double its package deliveries. Ten distribution hubs will be added to its network by May 2009, including facilities in Memphis, Dallas, Cincinnati and Hagerstown. The company will expand 23 other hubs, and expand or relocate 300 smaller terminals.

Swedish firm SCA (Svenska Cellulosa Aktiebolaget), based in Stockholm, will build a 1.3-million-sq.-ft. (120,770-sq.-m.) converting, paper-making and distribution plant on a 700-acre (283-hectare) greenfield site at the Barton Riverfront Industrial Park in Colbert County, Ala., near Muscle Shoals. The $240-million plant will employ 400 by the end of 2003, say comp any officials, who launched construction in November. But like many new plants today, the move is one of consolidation, as SCA will concurrently close smaller plants in Atlanta and LaGrange, Ga., and Brattleboro, Vt.

       
The decision to invest was based on improving efficiencies, profitability, logistics and customer service. A company press release stated that the location was chosen for its favorable proximity to customers, quality of labor force and quality of life in the area … but there were other concrete factors as well.

Lee Bingham

       
“We looked in North Carolina and in Georgia,” says Lee Bingham, senior vice president of SCA North America, “and we settled on the Barton site because it was ideal in terms of the physical condition of the site and our ability to get permits.”

       
Bingham says the site selection was an 18-month process, hinging in large part on what he calls “the great cooperation we got from the development authority SEDA [Shoals Economic Development Authority]. The state has been quite helpful too in terms of incentives for training. They were very accommodating in terms of working with the permitting. It couldn’t have been a more enjoyable experience from that standpoint.”

       
Both the state and county are pitching in to make infrastructure improvements, among them a four-lane access road. As for the site itself, there was little to improve.

       
“It was just an ideal site,” says Bingham. “It’s basically an old cotton field, so it’s very level, right on the Tennessee River, with a couple gas lines going through the property. We’re served by TVA [Tennessee Valley Authority], and they were very helpful, along with the SEDA group, in getting permits and easements, because we had to get easements across some of their land.”

       
Adding to the site’s favorable circumstances, says Bingham, is its ideal location geographically when it comes to the company’s Southeast markets.

       
Among the sectors the company is targeting for growth is the industrial facility market, which it calls a $521-million segment, $260 million of that total devoted to the purchase of disposable wiping products. According to the company’s calculations, there are 364,000 industrial facilities in the U.S., employing some 17 million workers.

       
SCA North America has acquired several U.S. companies over the past year. SCA Tissue North America is based in Neenah, Wisc. The personal hygiene, packaging and paper product company operates more than 60 sites worldwide, employing 41,000 people.